SUBSIM Radio Room Forums - View Single Post - The failure which was Reagan...in chart form!!

tater · 06-18-10, 11:11 AM

Yawn.

Things like personal savings are a function of individual choice. What happened was that people decided to start "living large," even if that meant debt. Borrowing, of course, was bound to skyrocket after the Carter years ("malaise" and stagflation) pushing us into double-digit mortgage interest rates. For the average person, mortgage debt utterly dominates their lifetime debt, the rest is noise. from the late 70s into the mid 80s, no one could afford to buy much of a house with interest rates that would quadruple the price of the home they bought—and massively increase monthly payments. Mortgage rates come down, and people start borrowing. Note that the principal they borrow increases, but the total amount actually paid is pretty much the same. Same payments, but you borrow more (hence larger debt graph).

You could also likely have a graph that showed the square footage per person in an average house in the US, and it would also start increasing.

Some of the other stuff, like the top 10% share of wealth is meaningless. Wealth is not zero-sum, the top 10% doesn't get that money by taking it from someone, wealth expands, but they got a larger share.

Creditor vs debtor nation? Same thing (though you can see the down trend starting well before Reagan). When money was too expensive to borrow, we lent money, but Americans at large didn't borrow much—it was literally at rates like current "payday loans," after all (virtual usury, lol). Once rates came down, Americans at large started borrowing. Again, the largest loans average people get are mortgages, by a wide margin. If the bulk of average Americans owns a decent home, it requires huge debt. Again, the total debt is the principal, so for the exact same monthly payments, you borrow more at lower rates. Note the switch from positive to negative is 1985-86. The Prime Rate in the early 80s was as high as 20.50%! It broke 10% heading down in mid 1985. Americans started borrowing more.

100 grand at 21% is $1750/mo for 30 years.
100 grand at 8% is $733/mo. for 30 years.
The same $1750 payment gets you ~$240,000 at 8%. So assuming people keep the same payments they had been making, all of a sudden they could be in debt 240k instead of 100k.

The graphs will have the leftists nodding in agreement, and the right showing that the people making the graphs "don't get it."

06-18-10, 11:11 AM	#5
tater Navy Seal Join Date: Mar 2007 Location: New Mexico, USA Posts: 9,023 Downloads: 8 Uploads: 2	Yawn. Things like personal savings are a function of individual choice. What happened was that people decided to start "living large," even if that meant debt. Borrowing, of course, was bound to skyrocket after the Carter years ("malaise" and stagflation) pushing us into double-digit mortgage interest rates. For the average person, mortgage debt utterly dominates their lifetime debt, the rest is noise. from the late 70s into the mid 80s, no one could afford to buy much of a house with interest rates that would quadruple the price of the home they bought—and massively increase monthly payments. Mortgage rates come down, and people start borrowing. Note that the principal they borrow increases, but the total amount actually paid is pretty much the same. Same payments, but you borrow more (hence larger debt graph). You could also likely have a graph that showed the square footage per person in an average house in the US, and it would also start increasing. Some of the other stuff, like the top 10% share of wealth is meaningless. Wealth is not zero-sum, the top 10% doesn't get that money by taking it from someone, wealth expands, but they got a larger share. Creditor vs debtor nation? Same thing (though you can see the down trend starting well before Reagan). When money was too expensive to borrow, we lent money, but Americans at large didn't borrow much—it was literally at rates like current "payday loans," after all (virtual usury, lol). Once rates came down, Americans at large started borrowing. Again, the largest loans average people get are mortgages, by a wide margin. If the bulk of average Americans owns a decent home, it requires huge debt. Again, the total debt is the principal, so for the exact same monthly payments, you borrow more at lower rates. Note the switch from positive to negative is 1985-86. The Prime Rate in the early 80s was as high as 20.50%! It broke 10% heading down in mid 1985. Americans started borrowing more. 100 grand at 21% is $1750/mo for 30 years. 100 grand at 8% is $733/mo. for 30 years. The same $1750 payment gets you ~$240,000 at 8%. So assuming people keep the same payments they had been making, all of a sudden they could be in debt 240k instead of 100k. The graphs will have the leftists nodding in agreement, and the right showing that the people making the graphs "don't get it."